CRANKIN’ WITH FRANK

Long-Range Planning Builds Successful Summer Locations
by Frank “The Crank” Seninsky
President of AEM and
Alpha-Omega Amusements

EAST BRUNSWICK, NJ — This column was written on June 18, four days before the calendar declares that summer “officially” begins. Yet for the operator who services summer tourist spots and seasonal locations, the “real-world” opening date of summer is the same as it is for the school kids, families, and businesses all over America: Memorial Day. And that means for the successful operator, preparations for summer 2002 operations actually began in the fall of 2001.

Here at Alpha-Omega Amusements and Alpha-BET Entertainment, in fact, we began putting our summer 2002 seasonal plans into action around last October. We began making those plans right after last Labor Day! So, even though the calendar says the 2002 summer season is just now coming upon us, now is really the ideal time to begin thinking about how to attack next summer’s market.

SEASONAL JUGGLING ACT

The fundamental art of servicing summer locations is learning how to perform the nonstop juggling act of moving equipment from fall/winter stops to summer stops and back again. How much equipment should move and how much should stay? How many labor hours will it take to transport the equipment to your shop for reconditioning and upgrades and out to the summer locations? How fast can the equipment be moved, without over straining your labor pool, your budget, or your locations’ goodwill?

How can you make this rotation process profitable? Or at least, how can you reduce the loss of cash flow that inevitably occurs from taking equipment out of a profitable year-round site, and setting it early (sometimes as early as mid-March) in a seasonal site weeks before the summer crowds appear?

These are the vital questions that confront a summer locations operator. How you answer them determines whether your summer business adds to your company’s bottom line, or shortens the years of your life – as well as those of your employees!

The logical place to begin is to focus on what you do when the summer season comes to an end: you begin immediately to plan for next summer. By late fall, you start to implement those plans by moving equipment out of summer locations. Now, since many summer locations close down entirely during the winter months, you might think an operator should simply haul away every single unit from a theme park (or any other type of summer location) and leave it bare until the next season’s opening day.

Not so. The size and weight of driving games and other large games can be challenging individually, and their collective bulk is massive. The time and labor required to move them are immense. It is more economical by far to leave one third to one half of your summer equipment onsite (the middle range earning pieces), while moving the key, top earning pieces from last summer to the route to ensure they are generating top dollar year-round.

By the way, the summer spots usually are not heated, so by the time this moving process begins in November, it could be very cold. You may have to deal with snow, ice, and (if you’re lucky) portable heaters.

Once the core equipment is moved out and run through your shop for reconditioning, there’s still plenty of work to do in the summer locations during the dead of winter. With the games that are left on site, the operator must move these games to new places within the location. The remaining equipment must be reconditioned and ensured that everything is protected from extreme cold, moisture, dust, and other elements. All this means working weekends, evenings, and whenever you can spare the many additional man-hours that are required.

WHICH GAMES SHOULD RETURN NEXT SUMMER?

Meanwhile, make a list of top games that you believe can come back off the route once winter ends and go back into your summer location(s). Which games will have the legs to go back into a summer hot spot? Usually any piece of equipment will experience a significant drop-off in earnings from one summer to the next, so you may put back just half of the units that were removed from each summer location.

While you make this list, you are going around to the trade shows and trying to find new equipment to order for your summer spots. With the lack of many new models to choose from, it is wise to determine which top-earning games from last season you can double or triple-up on, as these will need to be purchased used and reconditioned in time for opening day. By December, as the moving process begins, you’ve already hit the fall AMOA and Fun Expo and IAAPA; you may visit the London show in January, or perhaps a state show or a location show nearby.

As you walk the aisles of all these shows, you inspect new equipment and hope that you can test most of the models on your route to make sure that they are the units that you want to purchase. What new games or attraction pieces will draw people into your summer game rooms or arcades? Remember, your summer locations equipment has to compete with roller coasters or suntans and swimming. Also watch for good redemption games, merchandisers, and prize merchandise that can be obtained for summer sites. (And while you’re watching TV in your down time, notice what themes and trends might make hot merchandise for next summer, as well.)

SUMMER LOCATIONS WANT EARLY SET-UPS…

Most summer sites are eager to get an early jump on the season. They want all your games in place on opening day. Fine, except that opening day usually occurs well before Memorial Day, while school is still in session — even though small crowds will be around. It is much better to agree beforehand what percentage of the total number of games will be in place for the pre-season, which might be only weekends for April and most of May.

In some cases, our delivery truck drivers called to say they would be late delivering machines to summer locations because it was snowing! So we were juggling this problem on top of all the others. Such are the challenges that must be faced to give summer clients an A-plus setup.

This is another reason why you are doing a balancing act between summer and winter sites. This balancing act has two components: new games and existing inventory.

Getting new equipment shipped on time is (usually) easy; manufacturers can normally get machines to your summer sites a couple of weeks before opening day. But sometimes they cannot ship on time and this causes a chain reaction of problems. But when they can ship early, you are now faced with a cash flow problem when you must pay for all of the new equipment within 30-60 days. So you struggle between the need to give customers what they want on the one hand, and the need to live within real-world financial conditions on the other.

Juggling existing inventory between summer and winter locations is what keeps you in business. In order to make the opening day targets of the summer spots in the spring, you must now remove those high cost games that you “overstocked” your year-round locations with, and take many of those pieces back. In other words, you have to reduce the number of games in the winter locations while they are winding down for their slow summer season before the summer hot spots are even open.

Winter locations and year-round stops naturally resist letting go of high-earning pieces on an early basis. They don’t want to let the machines go until Memorial Day – if ever. Even though they completely understood that this equipment was only provided to them for their fall and winter seasons…even though they may have signed agreements to release this equipment in the spring…they still don’t want to give up the machines!

In some cases, winter locations now decide they want you to replace the hot items with filler pieces. This creates a double workload, running up your labor needs in order to move filler equipment (which has to be pulled from other locations and reconditioned) into winter sites, while you are supposed to be trucking equipment into summer sites at the same time. You have to use your bank credit line to pay these labor bills until the summer revenue really comes in and summer locations generate sufficient revenues that cover the credit line.

The only way to pull off this juggling act is to stagger the transfer process. Don’t try to move all the equipment from winter to summer spots at once; it’s impossible. Do it gradually! We begin around Easter to shift product from winter to summer sites. Thank goodness, most summer sites have different opening dates; they vary by as much as three weeks, depending on local market conditions such as school schedules, weather, and regional customs and traditions. The moving process is scheduled to be completed by Memorial Day, but sometimes runs into the first week of June.

MEMORIAL DAY: SUMMER BUSINESS BEGINS

When we hit Memorial Day weekend, the big summer season action really begins. Everything needs to be in place and fully operational. Your winter stops have slowed down. The summer site owners and you, as the operator, are eagerly anticipating big crowds of families and newly-freed school children on vacation, filling up the arcades and playing the games. And what happens instead on Memorial Day?

I’d say 15 out of 16 times, it rains! Also, you are competing with the biggest movie opening weekend of the year. So the Memorial Day weekend is typically disappointing – a blowout.

This year was unusual. We had decent weather on Memorial Day and we had decent crowds in most of our summer sites…but over the next couple of weeks, the weather was freezing.

Once setup is complete, you have about three minutes to toast your success. Then the summer season officially begins. Parts are tougher to obtain in the summertime. Some manufacturers have gone out of business; others just don’t stock parts. Many factories shut down for inventory during two weeks of the summer. Some big name manufacturers lay off all their techs for board repair during the summer, creating a three-month turnaround time on board repairs – they never release the critical schematics. Distributors and manufacturers may both go on vacation for a couple of weeks; none seem to be open on Saturday afternoons or Sundays or holidays.…the times you really need them!

This happens because factories and distributors are geared to their sales schedules, not the operator’s work schedule. Since sales of new machines typically slump during the summer, most factories and distributors “fade away” and are not as available as they should be to back up what they sold when that support is really needed. Operators have to prepare for this. We try to anticipate our parts needs and stock up in advance. If necessary, we may put out 12 units of a hot game, while holding back three to cannibalize for parts.

As the summer season begins, it is also vital to ensure that you have enough redemption tickets on location or in inventory. Make sure you have all the bar-coded and logo tickets that you will need for the summer printed weeks before opening day. Break the ordering and shipping processes in two: ship half the tickets for opening and the second half in early July. Special orders can take a few weeks to print and ship, so don’t ever take a chance and be caught short.

The same is true with merchandise, tokens, and many other supplies. One reason is that old bugaboo, cash flow. You will be ordering these supplies during the spring moving process, when little cash is coming in. Most suppliers fully understand the situation you are in and will extend terms during this period, if you have paid on time during the other months of the year.

Don’t make the mistake of waiting to place your orders until you really need these supplies, or until you have the cash in hand to pay for them. By then, many of your suppliers will be on vacation or out of stock!

COPING WITH WEATHER

The summer locations business is heavily weather-dependent. Sunny, warm days draw many people to the beach or the theme park, but they don’t play games inside shorefront arcades or park arcades as much as they enjoy the outdoor activities. So from an operator’s point of view, the “ideal” day is a perfect weather report with a sunny morning, and a sudden unexpected shower in the afternoon that drives everyone indoors. We instruct our clients to anticipate this pattern, because that is when their arcades and game rooms will really be busy.

In my own area, I have begun to suspect that weather reports about pending rain are exaggerated to keep people in the city, spending money on local businesses (that advertise on the station) rather than traveling out of the city or out of the state. Perhaps our amusement parks could use more clout with the weather stations! But whenever there is the slightest chance of rain at 4:00 PM or 6:00 PM, the weathermen around here make it sound like flood conditions will prevail over the entire weekend. Unfortunately, there is not much an operator can do about weather (or weather reports), other than be aware of their impact on the games business and to educate your locations on what to expect.

Operating the game on quarters versus tokens is an important issue for summer locations. Some amusement parks have all their games running on quarters. A large majority of shore arcades run their games on quarters. For myself, I’d much rather be on tokens. A games operation makes money on every customer who buys tokens, then walks away with unspent tokens in his pocket – this happens a lot. Also, security is much, much better with token-operated games. You don’t have to watch every single game with a camera to protect them in nooks and crannies against break-in and theft.

Tokens are far better for locations that are suitable for group discounts, group parties, heavy birthday party bookings, and other sites and events where the games are central. However, I do concede that the summer business runs so quickly that in a truly seasonal location, often there isn’t time to set up price incentives, discounts, value packages, and the like. But again, the superior security still makes it much more desirable, in my view, to run on tokens.

Why, then, do so many summer locations want to run games on quarters? They feel that the quarters can be spent throughout the park and the ‘impulse’ nature of seeing a game you want to play now could be diminished if you have to look for a bill changer to get tokens and then return to the game. Also, coin pushers look more appealing with quarters on the playfield rather than tokens. Additionally, if people can use the change in their pockets or get change from food buys, the likelihood of an impulse buy on games is perceived to be higher. (In my view, this is most often true for males, who dislike having coins in their pockets; but it is less true for women, who tend to put spare coins in their purses).

SUMMER ENDS ON LABOR DAY, RIGHT? NOT ANYMORE

July and August are when the big money is really made in summer seasonal locations. Whatever business you do in June, you will typically double in July. In the old days, summer business continued hot and heavy all the way through August and only came to a halt on Labor Day. Then kids went back to school in early September, and the operator (and park) could comfortably shut down their summer location operations.

Today, the really busy summer season is shorter than it was a generation ago. The reason: by mid-August, many of today’s kids start heading back for an early school start (especially colleges). That means summer locations lose a good part of their labor force. These locations also lose a good part of their customer bases for the same reason.

Not only does the “kid population” shrink drastically after mid-August; family business drops off, too. Moms and dads don’t travel without the kids; in fact, by August 20 they’re usually at Wal-Mart buying “back to school” items. This early cut-off to summer business means game revenues in summer locations typically plummet after August 15 or so.

But in a strange paradox, today the operator’s commitment to his summer locations may run much, much longer than Labor Day. In a somewhat desperate attempt to make up for those lost (late August) earnings, many summer sites now stay open long past the end of the true summer season. In fact, some summer locations now stay open weekends all the way through the end of November, hoping to grind out additional weekend revenues.

This places a major burden on the summer locations game operator. It means we have to keep a reasonable percentage of our machines in place at the summer sites many weeks or months longer than is really profitable for us. And lose the revenue from the fall/winter sites where these machines would generate significantly more earnings.

Fortunately, the most successful summer locations are run by highly professional people. They realize how extended summer dates create a major challenge for the operator, as well as for themselves. In my own business, theme park owners in particular treat my money like their own money. They do not demand that we buy everything that’s on the market. Instead, they walk the shows with me and are very judicious and cautious about ordering, trying to make the best possible use of my games budget. We also make sure that there is some budget money left over to invest in equipment that is released into the market in late July or August (perhaps it was released late or production in volume was slow to occur).

BEGIN PLANNING NOW FOR SUMMER 2003

By the time this column appears, most readers will be coming to the close of their 2002 summer season. Now is the time to begin thinking and planning for next summer. Remember, it never works if you’re not planning from one season to another! The need for long-range advance planning has an impact on contract renewal with locations: you must always try to get summer locations to renew their contracts for the upcoming season, well before this summer ends, in order to begin your planning for next year on closing day of this year. Our well-run summer locations recognize this as well, and work with us early to prepare for the following year.

When you add it all up, it’s clear the work required to operate games in summer locations is harder than ever these days: the high-earning part of the season is shorter, yet costs are higher. In response, summer location operators must work smarter as well as harder.

We must continually find new strategies, like adding scales that speed up the redemption reward process and game collections. We must continually find new suppliers that offer new levels of service, like ticket companies that print millions of tickets and don’t invoice until they actually ship. We must do everything we can possibly think of to make our operations more efficient and streamlined.

Educating your locations is also important. In fact, it’s the only way to get the cooperation you need. Let the locations know what challenges you’re facing as their operator. The good locations will understand that your success is their success, and they will make adjustments to support you. For example, most summer locations now cut commission checks and checks for received products to my company on a weekly basis, even if their payment is not officially due for another 30-60 days!

Not only does this type of accommodation ease our cash flow problems, it also creates goodwill. As operators, we bend over backwards for locations like that, because they are helping us make the project a success. There’s no room for ego in this process; even the biggest theme parks treat our company with respect and consideration.

Ultimately, it’s those personal relationships — and the resulting teamwork between operators and locations — that make summer business a winner for both parties. When both parties start the planning early and plan together, it makes for a smooth and successful summer season.